The objective of this study is to evaluate auditors’ perceived responsibility for fraud detection. Auditors play a critical role in managing fraud risk within organizations. Although professional standards and guidance prescribe responsibility in the area, little is known about auditors’ sense of responsibility for fraud detection, the factors affecting perceived responsibility, and how responsibility affects auditor performance. We use the triangle model of responsibility as a theoretical basis for examining responsibility and the effects of accountability, fraud type, and auditor type (...) on auditors’ perceived fraud detection responsibility. We also test how perceived responsibility affects auditor brainstorming performance given the importance of brainstorming in audits. A sample of 878 auditors participated in an experiment with accountability pressure and fraud type manipulated randomly between subjects. As predicted, accountable auditors report higher detection responsibility than anonymous auditors. We also find a significant fraud type × auditor type interaction with external auditors perceiving the most detection responsibility for financial statement fraud, while internal auditors report similar detection responsibility for all fraud types. Analysis of the triangle model’s formative links reveals that professional obligation and personal control are significantly related to responsibility, while task clarity is not. Finally, the results indicate that perceived responsibility positively affects the number of detection procedures brainstormed and partially mediates the significant accountability–brainstorming relation. (shrink)

A multiphase study tested a proposed mediated moderation model for the joint effects of ethical pressure and power distance orientation on accountants’ ethical judgments of earnings management. Results based on a sample of 354 accountants from China indicated that the relationship between ethical pressure and ethical judgments of earnings management is contingent on the accountants’ power distance orientation. That is, the relationship between ethical pressure and ethical judgments of earnings management was stronger for accountants with a high power distance orientation. (...) The results also demonstrated that ethical beliefs in support of the company serve as a mediator for the interaction effect of ethical pressure and power distance orientation on the outcome. These results are discussed in terms of viewing earnings management as a form of unethical pro-organizational behavior which can be effectively investigated within the framework of the person-situation interactionist model. (shrink)

The compliance-based approach and the integrity approach have been the mainstream responses to corporate scandals. This paper proposes that, despite each approach comprising necessary elements, neither offers a comprehensive solution. Compliance and integrity, far from being mutually exclusive, reinforce each other. Working together, in a correct relationship, they build a harmonized system that yields positive synergies and which also advocates prudence. It enables the generation of a culture of compliance that tends to minimize the technical and ethical errors in decision (...) making. In order to explore an applied harmonized approach, we analyze the audit committee, a specific and broadly accepted regulatory instrument. Formed by non-executive members, regulation requires these members to be dedicated, qualified, and independent as a guarantee of efficiency. We show how the compound of those elements produces positive effects in a context of solid governance. We conclude that it is the strong relationship between efficiency and prudence, in the creation of a culture of compliance, which enables the minimization of errors. (shrink)

The study contributes to building an understanding of the impact of political forces on the information environment of listed firms in a developing economy. Specifically, it investigates the tensions between politico-institutional factors and accounting regulation on the prolonged and incomplete implementation of the International Financial Reporting Standards in Bangladesh from 1998 to 2010. Two phases of interviews were conducted in 2010–2011 and IFRS-related enforcement documents from 1998 to 2010 were evaluated. The study contributes that IFRSs are being diffused to developing (...) countries like Bangladesh, but they invariably interact with local institutions, with variable outcomes. Coercive, normative and mimetic isomorphisms are low in Bangladesh. Notably, political forces have been undermining mimetic isomorphism because of the high level of government intervention and the high level of political lobbying. Political institutional pressures stand in the way of mimetic isomorphism and constitute negative forces that add further tension to accounting regulation in Bangladesh. Regarding the low level of normative isomorphism, there is evidence of a ‘blame culture’, with state institutions and professional accountancy institutions in the country blaming each other for the poor progress in IFRS implementation. Although the study focuses on Bangladesh, its results have implications for international policy makers, as well as the governments and regulators of other developing economies facing similar challenges in implementing IFRS. (shrink)